Why does physical proximity matter?

The New York Times has a story that looks at something I’ve been bothered by ever since I started this blog a little over a year ago: the paradoxical fact that even as Web 2.0 and ubiquitous Internet access makes it easier for people and companies to be located just about anywhere on the planet, physical location seems to still be so important. In fact, one of my first posts on this blog was about all the bloggers I read who had just run into each other at one of Mike Arrington’s parties, or bumped into some legendary tech guru at the diner down the street, and so on.

As the Times describes, some of this is dictated by venture capitalists, who have what is informally called the “20-minute” rule — that is, startups they are involved in can’t be any further away than 20 minutes. Does that sound like a modern industry that has embraced the Internet? Hardly. And yet, there is an intangible benefit that arises from being able to meet with people in person, something that was reinforced for me at our mesh conference back in May. E-mailing with someone like Scott Karp or Paul Kedrosky is one thing, but meeting them changes things immensely.

Is that just human nature? Possibly. But there’s no question it has an effect, even on Web-based startups. StumbleUpon.com, which was based in Calgary, moved to Silicon Valley in part because they raised financing there. One of the co-founders told me in an interview that they were looking to move anyway, and that it wasn’t really a big deal to go to San Francisco or wherever, but it still sort of rankles that a Web-based company has to pick up and move somewhere just to get financing.

Does that make it harder for Canadian (or Australian, or Danish, or whatever) companies to get noticed? Undoubtedly. Although VC blogger Fred Wilson of Union Square takes issue with that assumption, Kent Newsome says proximity will always matter (Rex Hammock disagrees and so does Fred from We Break Stuff — who should know, since he moved from the Valley back to Portugal to start his company). Anne Zelenka has some thoughts about where we work versus where we are, and so does Down the Avenue. Don Dodge says Silicon Valley occurred because success attracts success.

7 thoughts on “Why does physical proximity matter?

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  3. Matt, great points. I agree with you that meeting people in person — and spending time with them is important. I agree, also, that an influx of funding may cause the need to move. However, the article seemed to point towards the need to be in the Silicon Valley to be funded at all. I think a good Canadian argument against such a theory is Flickr — however, it was sold to a Silicon Valley firm. I travel to New York and San Francisco often and, thus, I don’t feel so remote being stationed out here in the outpost of Nashville. Also, I actually do agree — and believe the reality or perception or whatever it is that the tech world has a nexxus in the Silicon Valley. I guess I’m merely lamenting the irnoic myopia that exists with the notion that great ideas must originate there. I’m happy anyone gets funding for good ideas — no matter where they are.

  4. Thanks for the comment, Rex. I think it’s one of those things that definitely exists, but that we wish wasn’t the case. It would be nice to think that companies could succeed anywhere — and I think that’s true depending on the idea — but there’s still that inexorable pull from Silly-con Valley.

    The downside of that, as someone has pointed out, is that it kind of becomes an echo chamber where people suffer from group-think — which could be why the best ideas sometimes come from Sweden or somewhere else far away.

  5. Tech startups can be done anywhere, it is just that mofre of them are done in Silicon Valley than anywhere else. Like most things in life it is all about the poeple. Successful people attract other successful people who want to work with, or compete against the best.

    If you think of insurance it is Hartford. If you think of automobiles it is Detroit. Movies = Hollywood, Country music = Nashville.

    I wrote a blog today about why this happens. http://dondodge.typepad.com/the_next_big_thing/2006/10/why_are_more_st.html

    Don Dodge

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